Question

Dividends paid to common stockholders ______ be deducted from the payer's taxable income for tax purposes.

Answer 1

Dividends paid to common stockholders cannot be deducted from the payer's taxable income for tax purposes.

What is Dividend Payments?

Dividends are paid only on outstanding shares of common stock. Since the payments are the distribution of a company's profits to its shareholders, dividend payments decrease both the cash and the shareholders' equity balance shown on the issuing corporation's balance sheet.

Since they are paid on each share, the amount of cash distributed to each shareholder is based on the amount of shares they own.

Are dividends paid to common stockholders?

Dividends are paid only on outstanding shares of common stock.

A common stock dividend is the dividend paid to common stock owners from the profits of the company. Like other dividends, the payout is in the form of either cash or stock. The law may regulate the size of the common stock dividend particularly when the payout is a cash distribution tantamount to a liquidation.

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